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Zero to One by Peter Thiel.
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In Zero to One, PayPal co-founder and venture capitalist Peter Thiel contends that creating new things is the best way to profit economically, as well as the only path for human progress.

However, technology has stagnated today. Much of what we do repeats or builds on what’s been done before. It’s easier to copy something than to create something new. This moves the world from 1 to n, refining something that already exists. However, creating something entirely new moves us from 0 to 1.

Unless companies create new things, they’ll eventually fail regardless of how profitable they are today. There’s a limit to what we can gain by refining things, a point at which best practices won’t get us any further. We need to break new ground.

The Path of Progress

Progress can be either horizontal or vertical. Horizontal or expansive progress results from duplicating success—going from 1 to n. This kind of progress is easy to envision because it looks a lot like the present. Vertical or intensive (focused) progress requires doing something entirely new—going from 0 to 1. It’s more difficult to envision because we’ve never seen it before.

For example, starting with one typewriter and building 100 of them would be horizontal progress (duplicating something). Starting with a typewriter and building a word processor would be vertical progress (creating something new).

Globalization is horizontal progress—it entails taking something that works in a particular place and replicating it everywhere. For instance, China’s 20-year plan is to be like the West is today.

Technology, going from 0 to 1, is vertical progress—it encompasses anything new and better, including but not limited to computers.

Continued globalization isn’t feasible without technological progress because the industrialization of more countries will lead to more environmental problems and competition for limited resources. For instance, if China doubles its industrial production without technology improvements, it will double its air pollution. Spreading the practices of developed countries globally will bring devastation rather than wealth. The key to a better future is both imagining and creating the technologies to get us there.

Startup Lessons

Startups consisting of a few people with a common mission are the source of most new technology. But many tech startups today are hobbled by four erroneous lessons drawn from the 1990s dot-com bubble and crash:

  1. Make incremental advances: Be wary of big visions that drive bubbles. Move forward with small, incremental steps.
  2. Stay lean and flexible: To stay lean and flexible, don’t tie your hands with planning. Instead, try things and iterate or build on the ones that work.
  3. Build on the competition: Don’t try to create new markets. Build your business by improving on a product people are already buying from someone else.
  4. Focus on product, not sales: If you have a good product, it should spread virally without a need for advertising.

Tech startups treat these lessons as sacrosanct, but they actually undermine success, especially big innovations. The opposite of each lesson is more accurate:

  1. It’s better to be bold than inconsequential.
  2. A bad plan is better than none.
  3. Don’t compete: competition destroys profits.
  4. Sales strategy matters as much as product.

Monopolies and Competition

Monopolies are good for society. While it may seem counterintuitive, they can be more ethical, treat workers with greater consideration, and create more value than companies locked in competition do.

Competitors are caught up in a daily struggle for survival. For instance, with their low margins, restaurants have to do everything possible to minimize expenses—which can include paying minimum wage to employees and putting family members to work for nothing. In survival mode, money is everything.

In contrast, in a monopoly where profits are assured, there’s room to consider other things besides money. For instance, lacking intense competition, Google can give consideration to its workers, its products, and its impact on society.

Monopolies’ bad reputation comes from sometimes earning outsized profits at the expense of society. Certain monopolies corner the market on something that’s needed and jack up the price; customers have no choice but to pay it. This works for the owners in a world where nothing changes, like in the game of Monopoly, where you control as much real estate as you can, but you can’t create new real estate.

In contrast, creative monopolies do good and drive social progress because they operate in a different environment, a dynamic one. Instead of controlling all the options like Monopoly real estate, they create new options. They expand consumers’ choices by creating new categories of things. By adding value, creative monopolies make society better.

Monopoly Characteristics

Monopoly businesses with strong future cash flows share several characteristics:

  • Proprietary technology: This may be your greatest possible asset because it makes your product difficult to copy. For example, proprietary technologies used in Google’s search algorithms for aspects such as query autocompletion make the search engine hard to replicate. For proprietary technology to give you a monopolistic edge, it needs to be at least 10 times better in some major way than anything like it. Anything short of a dramatic difference will seem incremental and unimportant.
  • Network effects: A network effect is the way additional users improve the value of a product or service for all users. For example, the more your friends use Instagram, the more value you get from being on it too. To generate network effects, your product has to be immediately valuable to its earliest adopters and then grow from there. A network business has to work on a small scale before it can go big—in fact, you have to plan on starting small. Mark Zuckerburg started Facebook by getting just his Harvard classmates to sign up.
  • Economies of scale: A monopoly gets stronger as it grows because the fixed costs of creating a new product (like office space and engineering or development) are spread over a greater volume of sales and the cost per unit declines. When starting a business, you should build in the capability of scaling. For example, Twitter enjoys built-in scale: it can keep increasing the number of users without adding customized features.
  • Branding: Creating an unassailable brand is integral to having a monopoly. For example, Apple is the most powerful technology brand. Everything from product design (including look and materials), to store design, price, and advertising contributes to an overall impression that Apple products are like no other. Of course, branding alone isn’t enough—you also need substance. Apple’s market dominance is based on superior products backed by an array of proprietary hardware and software technologies.

Other Factors in Building a Monopoly

There are five additional considerations in building a monopoly:

  • Discovering a secret: Creating a great business that no one else can compete with starts with discovering and building on a secret. It can be an untapped opportunity or a different way of looking at a problem. For example, Airbnb recognized and connected a supply of unoccupied lodging with travelers’ demand for affordable and unique accommodations. The founders of Uber and Lyft built billion-dollar businesses by connecting people who needed rides with drivers willing to provide them. Believing in secrets (untapped potential) and looking for them enabled these entrepreneurs to see an opportunity no one else noticed.
  • Expanding your market: How you choose and expand your market are critical to your success. Start with a small market because it will be easier to dominate than a large one. Once you’ve dominated a small market, slowly expand into related markets that are a bit wider. This was Amazon’s approach. Jeff Bezos’s long-term goal was to dominate online retail but he chose to start by selling only one thing—books. After a successful start with books, the company began selling CDs, videos, and software and gradually expanded to other categories until it became the dominant online retailer.
  • Disrupting: When entrepreneurs think of their companies as disrupting a market, they’re focusing on things as they currently are, rather than coming from a new perspective. It’s far more important to focus on the new product you’re creating than on how old companies will react to it. If disrupting existing companies is part of your company’s identity, then your company isn’t new and isn’t likely to become a monopoly.
  • Being a ‘last mover’: The “first mover advantage” means getting into a new market first and taking a substantial share of the market before anyone else gets there. But moving first is a tactic, not a goal." Your goal is to generate cash flows for the future. You do this by starting with a small slice of the market (being the first mover) and gradually expanding, dominating each new slice until you own the ultimate market for your product. You want to be the last mover—the one who makes the last spectacular improvement in a market that ensures years of monopoly profits.
  • Understanding the power law: The power law describes a common phenomenon in which small changes can have disproportionate results. Startups should operate according to the power law. A narrow focus on the right thing will produce the greatest results:
    • One market will bring the greatest success.
    • One distribution strategy will outperform all others.
    • Some moments will count more than others.
    • What’s most important probably won’t be obvious.

Startup Basics: Key Decisions, Building a Team

When starting a company, it’s important to choose leaders who have the right technical knowledge and whose skills are complementary. Equally important, however, is how well the founders know each other and work together. You also need a structure and clearly defined roles so everyone is aligned to move the organization forward.

For effective alignment, you must make three decisions:

  • Ownership: Who will own the company’s equity. Ownership is typically divided among founders, employees, and investors.
  • Possession: Who will run the company day-to-day. It may be a founder/CEO or manager and employees.
  • Control: Who will govern the company. A board of directors (usually consisting of founders and investors) maintains control.

Compensation

A CEO of a venture-funded startup shouldn’t be paid more than $150,000 a year. High pay (more than $300,000) encourages him to protect his salary by defending the status quo and minimizing problems rather than exposing and fixing them.

Other advantages of low CEO pay are that it:

  • Encourages the executive to focus on increasing the value of the company.
  • Motivates employees to work harder. By working for lower pay, an executive demonstrates his commitment to the company and its mission. Employees will follow his example.

By the same token, over-paying employees encourages them to focus on what the company is doing in the present instead of thinking about how to increase the company’s value in the future. Cash bonuses also encourage short-term thinking. Offering equity or part ownership of the company shifts the focus to the future.

Recruiting

The first few employees in a startup might be attracted by exciting roles or equity. But beyond your first round of hires, you must be able to articulate to the 20th candidate why she should want to join your company.

Your answers need to be specific to your company. They should address:

1) Your mission: Explain what makes your mission unique and compelling—what’s the...

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Zero to One Summary Introduction

Some animals have a drive to build things like dams but only humans have the ability to invent entirely new things. In Zero to One, PayPal co-founder and venture capitalist Peter Thiel contends that creating new things is the best way to profit economically, as well as the only path of human progress.

This book, written with Blake Masters, is about launching companies that create new things. It stems from a course Thiel taught at Stanford in 2012 on startups. Masters was a student in the class and his notes, which were widely shared online, evolved with Thiel’s collaboration into this book.

The ideas are drawn from Thiel’s experience as a tech entrepreneur and investor, but they don’t comprise a formula for success—no one can tell you how to be innovative, because every innovation is by definition new and unique. However, the key to success is to look for value where no one else is looking.

Technology has stagnated today. Much of what we do repeats or builds on what’s been done before. It’s easier to copy something than to create something new. This moves the world from 1 to n, refining something we already have or know how to do. However, creating something new moves us from 0 to 1.

In business, each jump from 0 to 1 happens only once. The next Bill Gates won’t...

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Zero to One Summary Chapter 1: The Challenge of the Future

Thiel likes to ask job candidates what he calls a contrarian question: “What important truth do few people agree with you on?” The best answers point to the future.

Thiel’s answer is that most people think globalization will dictate or determine the world’s future, but he believes it’s technology that will.

The future will be rooted in today’s world, but different. It may be farther away or closer than we think, depending on the degree of progress we make. If things aren’t likely to change much over the next century, then the future is a century away; If they’re destined to change rapidly in the next decade, then the future is a decade away.

Answering the contrarian question is the closest we can come to predicting what will be.

The Path of Progress

Progress can be either horizontal or vertical. Horizontal or expansive progress results from duplicating success—going from 1 to n. We can easily envision this kind of progress because it’s much like the present. Vertical or intensive (focused) progress requires doing something new—going from 0 to 1. It’s more difficult to envision because we’ve never seen it before.

For example, starting with one typewriter and building 100 would be horizontal progress (duplicating something). In contrast, starting with a typewriter and building a word processor would be vertical progress (creating something new).

Globalization is horizontal progress—it entails taking something that works in a particular place and replicating it everywhere. For instance, China’s 20-year plan is to be like the West is today.

Technology, going from 0 to 1, is vertical progress—it encompasses anything new and better, including but not limited to computers.

These modes of progress can occur simultaneously or one at a time. For instance, the period from World War I through Nixon’s visit to China in 1971 featured technological development but not much globalization. However, since 1971, we’ve seen rapid globalization without much technological development beyond information technology.

Globalization is a path to...

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Zero to One Summary Chapter 2: Lessons of the Dot-Com Bubble

Remember the question, “What important truth do few people agree with you on?” To get an answer that points to the future, start with another question: “What does everyone agree on?”

The real truth is often the opposite of what everyone agrees is true. When you’re blinded by the latest conventional wisdom, you can’t create anything new.

Conventional wisdom helped create the dot-com bubble. The basic principle that companies need to make money was replaced in the late 1990s by a delusion that became the new conventional wisdom: companies racking up enormous, unending losses are actually succeeding because the losses are investments in future success. In the “New Economy,” where no loss was too big to tolerate, page views became a more relevant metric than profits.

We understand how wrong these accepted beliefs were only in retrospect. When they fall apart, we refer to the delusional beliefs as a bubble. But bubbles continue to influence our thinking long after they collapse because we draw the wrong lessons from them.

The tech bubble of the 1990s was the biggest bubble since the one ending in the Wall Street crash of 1929—the “lessons” of the dot-com dictate the way we think about tech today.

Thinking clearly about the future requires questioning what everyone “knows” about what happened in the past. To understand the real lessons of the tech bubble for startups today, it's useful to review the 1990s.

A History of the 1990s

We remember the 1990s mostly positively for the rise of the internet, but the 18-month dot-com bubble at the end occurred against a backdrop of growing financial problems in the U.S. and globally.

The decade started euphorically with the fall of the Berlin Wall in 1989. But in the early 1990s, the U.S. was slowly and painfully recovering from a recession. Unemployment climbed as the economy began a long shift from manufacturing to a service emphasis. From 1992 through 1994, the mood was anxious as jobs migrated to Mexico and concerns grew about globalization and competitiveness. The economic anxiety sank George H.W. Bush’s...

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Zero to One Summary Chapter 3: Myths about Competition and Monopoly

Anyone considering a startup should ask: “What valuable company hasn’t been built yet?”

Some companies create value without being valuable (profitable), but that isn’t enough to be successful (sustainable). A company has to accrue some of the value it creates.

Airlines in 2012 were a prime example of companies that create value without keeping much—they served millions of passengers, creating value of hundreds of billions of dollars, but made little money per passenger. While airfare averaged $178 each way, they made 37 cents per passenger trip. In contrast, Google created less value but brought in far more money—more than 100 times the airline industry’s profit margin that year. Google is worth more than three times the airline industry.

The difference is their markets: the airline industry is competitive, while Google benefits from monopoly status.

Perfect Competition

Economists have two models for markets: “perfect competition” and monopoly; perfect competition is considered to be the ideal.

Perfectly competitive markets are balanced: supply matches demand. The products are basically the same regardless of which company sells them. The price is whatever the market determines. If there’s a chance to make money, new companies enter the market, increase supply, and push prices down, thereby eliminating profits. If too many companies enter the market, some fail and prices rise again. In perfect competition, no one profits in the long run.

Monopoly

Monopoly is the opposite of perfect competition. While competing companies must sell their product at the market price, a monopoly owns the market and sets the price.

However, monopolies aren’t all the same: market domination can be achieved in different ways, some more defensible than others—for instance, bullying, acting illegally, by government sanction, or by innovating. In this book, monopoly refers to a company that’s so good at doing something that no other company can duplicate it. For example, no other company has competed with Google in search since the 2000s, when it...

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Zero to One Summary Chapter 4: Destructive Competition

The myth of healthy competition persists because competition is an ideology deeply embedded in our society. Because it distorts our thinking, it’s destructive to businesses and people. We preach and believe in competition, internalizing its commandments. But we get less, rather than more, when we compete.

The obsession with competition starts in the school system. We pit students against each other with grades. We minimize differentiation among students (like we do with business commodities in a competitive market) by teaching everyone the same subjects in the same way, regardless of individual learning styles and talents.

Students with top grades advance to higher education, where competition intensifies. High school dreams die and students become conformists, competing intensely for a leg up in conventional careers like investment banking. On the job, they compete for the same trappings of success. However, by being totally focused on competition, they lose out on the chance to do or create something new.

War and Business

In the workplace, war metaphors abound: we refer to headhunters, our sales force, captive markets, strategy, market penetration, and making a killing. But it’s competition, rather than business, that’s like war in that the rationale and results are often unjustifiable.

Literature offers two explanations for why people compete or fight each other:

1) According to Karl Marx, people fight because they’re different; the more they differ, the greater the conflict. The proletariat battle the bourgeoisie because they have different goals, as a result of differences in social class and wealth.

2) According to Shakespeare, opponents are often more similar than different. They fight without any reason. For example, in Romeo and Juliet, Shakespeare describes the warring houses of Montague and Capulet as “both alike in dignity.” The clans hated each other, though they couldn’t point to a reason.

Shakespeare’s explanation of senseless fighting is the more fitting metaphor for business competition. Within a...

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Zero to One Summary Chapter 5: Building for Future Profits

A monopoly by definition has avoided competition, but to be a great business, there’s more: it must last into the future.

To understand how this works, compare the New York Times Company with Twitter. Each employs thousands of people and delivers news to millions. However, in 2013, Twitter was valued at $24 billion, which was 12 times the Times’ market capitalization. Yet the Times earned $133 million in 2012, while Twitter lost money. How could the money-losing Twitter be worth more than the money-gaining Times? (Shortform note: market capitalization is the total value of a company's shares of stock.)

The reason for the dramatic difference in value is cash flow—the hallmark of a great business is its ability to generate future cash flow. Investors expected Twitter to generate monopoly profits for the next 10 years, while investors believed the New York Times lacked that ability.

A business’s current value is the sum of the profits it will earn throughout its lifetime. Low-growth businesses are those like newspapers that aren’t expected to grow dramatically in the future—most of their value is near-term. They might retain their value and keep current cash flows for a few years, but competition will erode it in the future. A successful restaurant might be profitable today, but cash flows will dwindle in a few years as new restaurants open.

The pattern is the opposite for tech companies—they often lose money initially and require time to build value. Most of a tech startup’s value will be a decade or more in coming.

For example, by March 2001, PayPal hadn’t made a profit, but revenues were growing 100% year over year. Thiel calculated that 75% of the company’s current value would come from profits generated in 2011 and thereafter. However, he underestimated. At the time of this book’s publication in 2014, it appeared most of the company’s value would come from 2020 and beyond.

The Allure of Short-Term Profits

To be valuable, a company has to both grow and persevere. However, many entrepreneurs overemphasize short-term growth because it’s...

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Shortform Exercise: Monopoly Profits

How your company chooses and expands its markets is critical to its success. You should target a small niche that you can dominate, then slowly expand to related markets and eventually larger markets while maintaining monopoly control.


Think about your business or a potential future business. How would you define the market (target customer and size, other potential players)? How could you check to make sure that your intended market actually exists?

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Zero to One Summary Chapter 6: Success Comes from Planning

Businesspeople debate whether success comes from luck or design. Some popular writers and leaders emphasize luck and downplay the importance of design or planning in contributing to success. This makes many people think planning—trying to shape the future—is pointless.

For instance, author Malcolm Gladwell writes in Outliers that success results from “lucky breaks and arbitrary advantages.” Warren Buffett notes that he was lucky to be born with certain qualities. Jeff Bezos and Bill Gates both claim luck played a role in their success.

It’s possible luck could play a role in an individual success, but luck isn’t sufficient to explain how the same person—for instance, Elon Musk, Jack Dorsey, Steve Jobs—could achieve a series of extraordinary, multibillion-dollar successes.

When Dorsey, the founder of Twitter and Square, tweeted in 2013 that “Success is never an accident,” most of the responses were dismissive, citing white male privilege over intelligent planning as the biggest factor in success. However, while connections, wealth, and experience—and luck—can be factors, in recent years, we’ve tended to ignore or overlook the importance of planning.

In the past, people thought differently. From the Renaissance and the Enlightenment into the 20th century, people believed you made your own luck by working hard. Ralph Waldo Emmerson wrote, “Shallow men believe in luck, believe in circumstances … strong men believe in cause and effect.”

Today, whether you think of the future as determined by chance or design affects how you act in the present and whether you ultimately succeed.

Ways of Thinking about the Future

You can think of the future as either: 1) definable and definite or 2) a hazy uncertainty. Your belief about the future determines what you do in the present. If you think of the future as definable and definite, you try to understand it and work to shape it. If you think of it as indefinable and random, you can’t intelligently predict or plan for it.

The prevailing belief today is that the future is unknowable or indefinite. Many...

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Shortform Exercise: What’s Your World View?

If you’re optimistic, you tend to think of the future as definable and definite, as something you can understand and shape. If you’re a pessimist, you think of it as uncertain and indefinite; since it's random, you can’t intelligently predict or plan for it.


What’s your view of the future? Are you an optimist or a pessimist?

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Zero to One Summary Chapter 7: The Power Law

The power law is the key to understanding how a handful of startups achieve exponential success. But it’s so interwoven into our social and natural worlds that people often don’t recognize it when it’s operating.

The power law describes a common phenomenon in which small changes can have disproportionate results.

The Pareto Principle, named after economist Vilfredo Pareto, is an example of a power law. In 1906, he determined that 20% of the people in Italy owned 80% of the land. Also, called the 80-20 rule, the principle applies everywhere in nature and society. In his garden, Pareto found that 20% of the peapods produced 80% of the peas.

Compounding interest is also a power law. In fact, compounding is such a powerful concept that Albert Einstein is erroneously credited with calling it “the most powerful force in the universe” and “the eighth wonder of the world.”

This chapter shows how the power law works in the world of startups and venture capital. Venture capitalists invest in startups in the hope that in a few years, a company will “take off” and the investor will profit from the spurt in growth. However, some companies will grow more than others.

The power law says that a few companies will achieve exponentially greater value than all others.

The Power Law of Venture Capital

Venture capitalists search out promising tech startups to invest in for a share of the profits. While many of them don’t fully understand it, the power law greatly influences their results.

If companies in a venture fund portfolio gain value and go public or are sold to larger companies, the venture fund makes money. However, a venture fund typically loses money at first because most of the companies in its portfolio fail soon after starting. The investors hope the fund’s value will shoot up in a few years when the most successful startups experience exponential growth and scale up.

They try to identify companies that will excel, while hedging their bets—which is a mistake. They expect portfolio returns to be normally distributed, with good companies returning...

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Zero to One Summary Chapter 8: The Value of Secrets

Creating a great business that no one else can compete with starts with discovering and building on a secret—it can be an untapped opportunity or a different way of looking at a problem. This chapter suggests ways to think about secrets and how to find them.

There’s a lot we don’t understand or haven’t thought of. Some secrets may be unfathomable, for instance string theory, the so-called Theory of Everything, which describes the universe in terms of strings. However, other secrets are challenging but still discoverable.

For example, the business version of the contrarian question—”What valuable company hasn’t been started yet?”—is challenging but answerable. As long as there are secrets to discover, there are revolutionary companies to start.

Our Vanishing Sense of Mystery

Today, most people act as if there isn’t anything left to discover; they simply accept conventional wisdom.

Unabomber Ted Kaczynski wrote a “manifesto” arguing that people are depressed because all of the world’s challenging problems have been solved. He claimed people need challenging goals to work for, but only easy and impossible problems are left and addressing those is pointless. So he sought to destroy all institutions and technology so people could start over on solving challenging problems.

Kaczynski was mentally ill, but many people have the same kind of certainty that we know everything we need to know. Society has come to believe there aren’t any challenging secrets left to discover.

Specifically, four trends have undermined our belief in secrets:

  • Incrementalism: from an early age, we’re taught that the right way to do things is by taking one small step at a time. You don't get credit for thinking outside the box or learning something that’s not on the test. But if you follow directions step by step, you’ll get an A.
  • Risk aversion: People are afraid to explore or look for secrets because they’re afraid of being wrong. Secrets haven’t been vetted by the mainstream, so if you announce something new, you’ll risk going out on a limb by yourself...

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Shortform Exercise: Thinking Unconventionally

Building a great company requires out-of-the-box thinking rather than following conventional wisdom. Often the truth is the opposite of what everyone believes.


Make a list of the most common conventional beliefs you’ve heard at your company (things that are assumed to be true) about its product(s) and market.

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Zero to One Summary Chapter 9: Building a Strong Foundation

While all startups are different, every startup needs to get certain things right at the outset because it’s impossible to fix them later. Put another way, “Thiel’s Law” states that a startup with a flawed foundation can’t be repaired.

Whether you’re building a business, a house, or a country, what you do at the beginning determines how well your creation will hold up in the future. America’s founders spent months at the Constitutional Convention debating fundamental questions of how government should be structured—for instance, how congressional representation should be set up.

Since then, structural changes have been difficult and rare. Since the first 10 amendments (the Bill of Rights) were ratified 1791, the Constitution has been amended just 17 times. While the system of apportioning congressional seats is problematic today—for instance, California has the same representation as Alaska although its population is much greater—change is unlikely.

Similarly, what you do when starting a company can be difficult to change later if it turns out to be wrong—for instance, picking the wrong co-founders or directors can be hard to correct except possibly in a crisis scenario like bankruptcy. A great company requires a strong foundation.

Choosing Partners

The most critical question in starting a business is choosing partners or co-founders. As in marriage, if you choose the wrong person, breaking up can be ugly.

Of course, no one wants to think at the start of a relationship about what can go wrong—people want to be optimistic. But if the founders develop unresolvable differences, the company will be at risk.

Here’s an example. Thiel’s PayPal colleague Luke Nosek co-founded a company in which Thiel invested. The two co-founders were opposite personality types; they’d met at a networking event and without getting to know each other, decided to start a company. This would be like marrying someone you met while playing the slots in Las Vegas—the odds are against it working out. The company failed and Thiel lost his money.

When starting a company, it’s...

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Zero to One Summary Chapter 10: Building a Cohesive Team

We often think of coworkers as people we need to get along with at work, but don’t have to like or befriend outside of work. This is considered being professional—but it’s not the way to run an extraordinary startup.

When you’ve discovered a new niche market, you need to move quickly to dominate it and distance your company from potential competition. To move fast with maximum productivity, you need a tight-knit and extremely dedicated team—people with more than just a transactional relationship with each other.

Many tech companies think the way to attract recruits and build a committed culture is by offering perks, such as free laundry pick-up, yoga and massages, an on-site chef, pet day care, and so on. But perks have no value unless they’re backed with substance. Further, culture is something a company is, not something it has. A company is a group of people pursuing a mission; its culture is how they do that.

Beyond Professionalism

The first team that Thiel built became known as the “PayPal Mafia” because so many early employees established lasting relationships and went on to help each other start great new companies. Among them were seven new companies worth more than a billion dollars each: LinkedIn, Yelp, Yammer, YouTube, Palantir, Tesla, and SpaceX.

Instead of focusing on office amenities, Thiel focused on hiring compatible employees and fostering a strong sense of community and commitment to a goal everyone was excited about. PayPal’s culture, in effect, spread into new companies.

Instead of the professional view of a workplace where employees check in and out, simply exchanging hours for a paycheck, work relationships should extend beyond work and also be long-lasting. In fact, if the considerable time you spend at work doesn’t build longer-lasting relationships, you haven’t used it well.

Stronger relationships result in better work and help people build successful careers beyond PayPal.

Recruiting

The first few employees in a startup might be attracted by exciting roles or equity. But beyond your first round of hires,**...

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Shortform Exercise: Building a Team

Thiel argues that startups should choose people for their initial team who are as similar as possible to enable the team to work cohesively and efficiently from the start.


In building a team for your company or a potential new business, what common qualities would you look for?

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Zero to One Summary Chapter 11: If You Build it, You Still Have to Sell It

Many Silicon Valley entrepreneurs underestimate the importance of distribution, which encompasses whatever it takes to sell your product (advertising, sales, marketing, and distribution channels). But understanding distribution and having a plan for it is critical to a company’s success⁠—it should be part of designing your product.

We often overlook the importance of distribution because society in general looks down on salespeople and advertising as dishonest and manipulative. Silicon Valley entrepreneurs take this a step further—because of a bias toward building rather than selling, they often believe their product is so superior it should sell itself: if they build it, customers will come.

But customers won’t buy your product automatically; you have to sell it, which is more challenging than many entrepreneurs and engineers realize.

The Hidden Art of Selling

Silicon Valley “nerds” should care about advertising because it works—or it wouldn’t be a $150 billion industry that employs more than 600,000 people.

But sales works differently than many people think. They think they’re not influenced by pitches because they don't run out and buy the advertised items. But advertising’s intent isn’t to get you to buy a product right away, it’s to leave an impression with you that will drive sales later.

The sales process is often subtle—selling is a hidden art that secretly drives the economy.

All salespeople are actors; like actors, their priority is persuasion, not transparency. We react negatively to inept salespeople (“used-car salesman” is a slur), but the best salespeople are masters who sell without our realizing it.

For example, Mark Twain’s character Tom Sawyer persuaded his friends to whitewash a fence for him. That took talent, but his master stroke was convincing them to pay him for the privilege of doing so. They never caught on.

Sales still works best when hidden. Sales is never mentioned in anyone’s job title—for instance, advertising salespeople are “account executives;” fundraisers trying to sell you on a cause work in “development,”...

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Shortform Exercise: Your Distribution Plan

Some entrepreneurs develop a great product but fail to plan for its distribution, or the process for selling the product (advertising, sales, marketing, and distribution). But customers aren’t going to buy it automatically. Distribution should be part of your product design.


Think of a product you currently sell or a potential product. What are your current or planned methods for marketing/selling it?

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Zero to One Summary Chapter 12: Will Computers Replace Us?

A Forbes magazine headline once asked: “Will a machine replace you?” It’s a question people often ask as computers get more powerful and more effective at performing human tasks. At the extremes, futurists almost hope computers will replace human workers, while Luddites want society to stop creating new technology because of that fear.

But it won’t happen because computers complement human abilities—they don’t substitute for humans. In the future, the most valuable businesses will be the ones that use technology to help and empower people to do things better, not replace them.

Substitution and Complementarity

We’ve seen that humans can replace or substitute for each other as a result of globalization—for instance, Indian, Chinese, or Mexican workers can replace American workers in manufacturing and customer service.

Americans fear technology will one day do the same thing—for instance, giant server farms will take over work people are doing. But these scenarios are different. In a global marketplace, people compete with each other for jobs and resources, but computers don’t compete with humans for either one—again, they complement people by increasing their abilities.

Globalization Substitutes

In 1992, third-party presidential candidate and businessman H. Ross Perot warned about the dangers of foreign competition, famously predicting a “giant sucking sound” as American jobs flowed to Mexico under the North American Free Trade Agreement.

In contrast, Presidents George H.W. Bush and Bill Clinton extolled free trade, in which governments refrain from trying to gain an advantage by placing tariffs on imports or subsidizing exports. The idea is that everyone ultimately will be richer if people specialize based on their advantages (such as resource availability) and trade with each other.

In practice, this has worked better for some workers than others. Countries usually gain the most from trade when they have the biggest advantages. But having a big unskilled labor supply can be an advantage too.

However, the challenge of the future won’t...

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Zero to One Summary Chapter 13: Making Green Tech Work

The start of the 21st century was marked by a boom in clean technology, spurred by several high-profile environmental disasters: smog in Beijing that was so bad people couldn’t see or breathe, arsenic polluting the water in Bangladesh, and blockbuster hurricanes in the U.S (Ivan and Katrina) prompting worries about future effects of global warming.

Entrepreneurs launched thousands of green technology companies and investors kicked in more than $50 billion. However, the rush to cleantech created a bubble. Most cleantech companies failed—Solyndra was one of the most notorious. When the maker of solar panels collapsed it left taxpayers on the hook for over $500 million. Over 40 solar companies folded or filed for bankruptcy in 2012.

Conservatives blamed the crash on government involvement. In reality, most cleantech companies crashed because they failed to adequately address the seven questions crucial for new companies:

  1. Engineering: Is your technology a significant advance or only incremental improvement?
  2. Timing: Is this the right time to sell this technology?
  3. Monopoly: Are you targeting a big share of a small market?
  4. People: Do you have the right people on your team?
  5. Distribution: Do you have a plan to sell your product?
  6. Durability: Will you dominate your market in the next 10 to 20 years?
  7. Secret: Have you identified a unique opportunity overlooked by everyone else?

As previously explained, a startup won’t succeed without a business plan that addresses each question. If your answers are weak, your company will fail—however, with a solid answer for each, you'll be on your way to having a great business.

As examples of how not to run your business, here’s a look at cleantech company responses to each question.

  • Engineering: As previously noted, a great company should have proprietary technology that far exceeds that of the nearest rival. Cleantech companies rarely offered improvements two times better, let alone 10 times better. In Solyndra’s case, its product was worse: the company’s cylindrical...

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Shortform Exercise: Startup Success

To succeed, a company must have solid answers to the following questions: Engineering: Is your technology a significant advance or only an incremental improvement? Timing: Is this the right time to sell this technology? Monopoly: Are you targeting a big share of a small market? People: Do you have the right people on your team? Distribution: Do you have a plan to market and sell your product? Durability: Will you dominate your market in the next 10 to 20 years? Secret: Have you identified a unique opportunity overlooked by everyone else?


Answer the above questions for your company or a potential future business.

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Zero to One Summary Chapter 14: Eccentric Founders

The six people who started PayPal were eccentric: they had unconventional backgrounds and sometimes strange interests (four of them built bombs in high school). However, for the tech world, PayPal’s founders weren’t that unusual: tech entrepreneurship and eccentricity seem to go together. This can be mostly a strength if it doesn’t get out of hand.

Many founders have traits that are both extreme and paradoxical. For instance, they may be:

  • Cash poor but millionaires on paper
  • Obnoxious but also charismatic
  • Insiders and outsiders
  • Both famous and infamous

Sometimes founders purposely exaggerate certain traits, or their admirers exaggerate them to build a myth. Other times, founders are just “naturally” extreme—they’re unusual from the beginning and seem to get more unusual as life goes on.

Examples of eccentric founders include:

Howard Hughes, who died in 1976, was known during his era as one of the richest people in the world. He produced nine successful Hollywood films and designed and built aircraft that set multiple speed records. Later, he became known for eccentric behavior and a reclusive lifestyle, driven by obsessive-compulsive disorder.

Richard Branson, the billionaire founder of the Virgin Group, which includes more than 400 companies, started his first business at 16 and founded Virgin Records at 22. He started Virgin Atlantic Airways in the 1980s and in 2004, founded a spaceflight corporation. He won media attention and built a brand through various eccentricities—for instance, serving airline passengers drinks with ice cubes shaped like his head.

Sean Parker, who founded Napster and later was founding president of Facebook, was a hacker in high school, who came to the FBI’s attention and was arrested. He got into legal trouble again with Napster, which was shut down by the courts. He had to leave Facebook after allegations of drug use, but he...

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Zero to One Summary Chapter 15: Four Views of the Future

There are four ways of thinking about the future, according to philosopher and Oxford professor Nick Bostrom:

1) Recurrent collapse: It will follow a historical pattern alternating between prosperity and ruin or collapse. This was the view of ancient people. Since we’re in prosperity today, humanity’s next cycle will be collapse.

2) Plateau: The future will look a lot like the present as poor countries catch up with rich countries and the world reaches a plateau of development. Many people hold this view today.

3) Extinction: The world may experience a catastrophe too big to contain and survive, given our global interconnectedness and weapons of mass destruction.

4) Takeoff: Humanity is readying for takeoff toward a better future, which will be indescribably different from the present.

The periodic collapse scenario seems unlikely because we have the knowledge to stave off any collapse that’s short of catastrophic. Annihilation or extinction are more probable.

Today, most people envision continued globalization and convergence—in other words, more of the same. The question is whether such a plateau could last. At that point competition for wealth and resources would likely be more intense than ever. Without new technology to ease competition, the status quo could dissolve into conflict. And conflict on a global scale would result in extinction.

That leaves the fourth scenario—we create new technology for a much better future. Some describe...

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Shortform Exercise: What Company Could You Build?

A key question that Thiel poses to entrepreneurs is, What valuable company hasn’t been started yet? Answering it requires discovering a secret—for instance, seeing untapped potential or solving a problem by looking at it in a new way.


Think of a problem, inconvenience, or opportunity you encountered in the past week. What was it?

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Table of Contents

  • 1-Page Summary
  • Introduction
  • Chapter 1: The Challenge of the Future
  • Chapter 2: Lessons of the Dot-Com Bubble
  • Chapter 3: Myths about Competition and Monopoly
  • Chapter 4: Destructive Competition
  • Chapter 5: Building for Future Profits
  • Exercise: Monopoly Profits
  • Chapter 6: Success Comes from Planning
  • Exercise: What’s Your World View?
  • Chapter 7: The Power Law
  • Chapter 8: The Value of Secrets
  • Exercise: Thinking Unconventionally
  • Chapter 9: Building a Strong Foundation
  • Chapter 10: Building a Cohesive Team
  • Exercise: Building a Team
  • Chapter 11: If You Build it, You Still Have to Sell It
  • Exercise: Your Distribution Plan
  • Chapter 12: Will Computers Replace Us?
  • Chapter 13: Making Green Tech Work
  • Exercise: Startup Success
  • Chapter 14: Eccentric Founders
  • Chapter 15: Four Views of the Future
  • Exercise: What Company Could You Build?